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It's a big, noisy universe of stocks out there. Welcome to Goodbye or Good Buy. Our goal to help cut through that noise to navigate the best moves for your portfolio. Today, we're taking a look at stocks in the AI race related to them. I'm here with Jensen Investment Management portfolio manager, Kevin Walkush. Thanks for coming in. Appreciate it. So let's talk about your buy stock. It is Accenture, and this is a really interesting one to me because it's not one that people automatically think of when they think of the AI trade. But they have really been, their consultants have really been working on training and improving people's understanding of AI here. So the stock hasn't done much over the past year, but let's talk about why you like it here. Why is it positioned for AI leadership?

First and foremost, a third, $3 billion commitment to tool up for AI, so that they are enabled and ready to deliver AI for their clients. Historically, a similar sort of investment was made for cloud back in the day, similar commitment. It was an opportunity where they ultimately took a lot of share and really sort of grew in excess of the market. So we think they're incredibly well positioned from an investment standpoint to really prosper from AI. We also like the fact that they don't have to choose the winning AI. They just have to maintain their market performance, market leadership in terms of being able to execute, in terms of implementation and helping their clients. And so, in that regard, there's a strong sort of risk mitigator or a play where you don't have to really choose the right one, just choose the momentum, which we think is going to be very strong long-term for the enterprise. And we think they're well positioned for that.

So in other words, you know, Accenture, as a huge consultant, I'm a company. I say, I want to implement AI, but I don't know how, I don't know where, I don't know what vendors I should use. That's where Accenture would come in and just help you do all that, I guess.

Absolutely. And they've had long-standing relationships with their clients. A lot of their clients, so in terms of IT services, they're a global leader. They have the greatest breadth in terms of services, but also greatest global reach. They have a large number of clients that are basically booking revenue of over a hundred million a year. They call them diamond clients. So these relationships are very long-term and very ingrained. And so when we think about their ability to sort of coach and really help their clients understand and evolve with the advent of AI, like they've done with all other technologies historically, we think, again, that's going to be a strong value driver for them.

And speaking of technologies, you mentioned this one, enterprise cloud, which isn't going away.

Right. So there's some opportunities there.

Absolutely.

When you listen to Accenture, they say really only 40% of all enterprise loads have moved to the cloud. That means there's another 60% of uplift. You also really can't do AI without cloud. And so what you're seeing then right now is a large scramble to basically be cloud enabled and then AI enabled. So that sort of sideline demand that was on the sideline for cloud is getting pushed to move quicker to be prepared for AI, as they want to go down that implementation curve.

And let's talk about the implementation. You think there is that big profit uplift as they send out their army of folks to to put this into place.

Absolutely. They have 774,000 employees globally. They focus on IT services and IT implementation. While AI is really geared towards developing efficiencies and optimization within the space, specifically software. The more I talk with software engineers, the more efficient they have been already. And so when we think about them leading sort of best-in-class in terms of business functionality and operations and management, they always turn that lens on themselves. So we think there's a great opportunity where they can really optimize that employee count, and we think there's opportunity where they can deliver more value, probably with a lower headcount.

Kevin, I don't usually do this, but I'm going to go backwards for a second to the chart. Why hasn't the stock done better if they are indeed poised to, you know, take advantage of all this stuff?

We we think there's a short-term misunderstanding in the market. You know, we think the market is very focused on today's sort of revenues, which are a little bit muted. If you kind of go back, you look at long run, sort of average within this market, it's a high single digit type market. They've been able to hit that. They've been able to exceed that and take share. Um, we saw COVID, we saw a massive pull forward in demand. So the revenue jumped 3x of growth. So they're in the 20s. What we're seeing then right now is sort of a lull. It's sort of a tough comp situation, but also on the doorstep of AI. These large IT buyers that want to spend $100 million a year are pausing to understand where they want to position. And so they're just taking a pause. We think the market is too focused on the short term, thinking that this is going to go on into perpetuity. We think the market's going to rebound, and we're already seeing that this year. So,

One other thing we like to talk about is what could be a risk here, and it could be perhaps that it does take longer to ramp all this up.

Right. It looks like, you know, from our opinion, the market, the street is really sort of focused on quarterly earnings. They're going to release next month. Um, what we're seeing is is there's a laser focus on how much bookings they're already doing in AI work, the rate of growth, and the relative contribution relative to revenue. If that's not quite meeting the street's expectations, we think that gives more short-term headwinds. But again, we think that builds up potential for long-term returns.

And you guys have a position in Accenture?

It's one of our top positions.

Okay. Let's get to the one you don't like. This might be a little controversial. It's meta. The stock's up 40% over the past year. Everybody seems to love it recently, which maybe is part of the problem.

Right. I mean, I think, you know, if you look at it even year to date, it's up almost 14 times the street. Uh, as you said, it's up 2x last year. It's up multiples in three and five-year periods, strong momentum play. Um, fundamentals do look interesting. It does look, you know, I'm a quality large, large cap quality growth manager. I want to look for consistency. I want to look for sort of some risk mitigation. And when I look at meta, I don't see a lot of risk mitigation. Um, and so I think the path for owning meta and the ride is pretty bumpy. And right now, it looks like there could be cresting. And so right now, it looks like if you're putting money to work, it might, there might be other opportunities that might do better.

Well, and speaking of that, the bumpiness, I mean, it's been pretty volatile to your point.

Absolutely. And, you know, I mean, this goes back long periods of time. You have, um, while Mark Zuckerberg's done a great job, he's also been, he has a high degree of control within the business, more than we see in other businesses. And so, and that's led to some questionable decisions in the business in terms of direction and focus. And so it's always been, from a leadership standpoint, a little bit uncertain. And so, we think that's sort of played out in the performance of the business, and then ultimately that's manifested into the performance of the stock.

Well, that sort of has something to do with the next point as well, which is the regulatory and litigation overhang, which is interesting because Zuckerberg has obviously, um, you know, definitely allied himself with this administration. Does that remove any of that risk?

Right.

I think domestically there's probably some mitigation to the risk, but I don't think it's going to go away. And I think that what we've seen in other names that are our large cap tech names that sort of face similar sort of litigation and regulatory challenges, it tends to be a little bit of a break or governor on stock price performance and adds a layer of volatility and uncertainty. So we don't think they're going to escape it. Uh, we still think the target's on their back. We think social media has a larger target than others within the tech space, and we don't think that'll go away. And then we also think the EU is not going to let up in terms of their regulatory and litigious eye towards.

Right. Yes. And he's not he's not allied with them. So, and then, um, what could go right, I guess here, is that they could continue to sort of harness AI and monetize it.

Right. I mean, we got to give them credit. They've done a good job of applying AI to their own business. They're seeing good execution in terms of their core ad business. Um, they've really extended within to the consumer electronics with the AI-enabled meta glasses. So you're seeing sort of forays into that, and then the llama model, which I think they'll have a hard time really sort of getting traction within the enterprise space because they're so new. It takes a long time to build that credibility. Um, so there are some successes. And so if they can continue to build on that in a very consistent way and maybe a little bit less volatile, we could definitely see some more runway, and I think that's where I'd be wrong.

And any position in meta?

We have no position in meta.

Okay. Kevin, thanks so much for coming. Appreciate it. And thank you so much for watching Goodbye or Good Buy. We'll be bringing you new episodes at 3:30 p.m. Eastern.

Right. Thank you so much.